Blue Nile Shipping Company Ltd v Iguana Shipping and Finance Inc & Ors

Claims for consequential loss arising from damage to the ship by reference to whose tonnage limitation is calculated fall outside Article 2(1)(a) and Article 2(1)(f) of the Limitation Convention 1976. The result does not depend on whether the claim is brought by owners or charterers, or on the identity of the person seeking limitation. The relevant question is the scope and character of the claim. Where the loss is consequential upon damage to the relevant vessel, the vessel owners cannot limit their liability in respect of it under those provisions, subject to the ordinary issues of causation, remoteness and quantum.

The claim arose from the collision between the Darfur, owned by Blue Nile, and the Happy Fellow on the River Seine. Baco-Liner, the time charterers of the Darfur, claimed damages against Blue Nile under the charterparty and/or in tort. Blue Nile had constituted a limitation fund in England under the Limitation Convention 1976. A preliminary issue was ordered as to whether Baco-Liner’s claims were subject to limitation.

By the hearing, the parties had agreed that some claims were, and one claim was not, limitable. The remaining dispute concerned whether the claims fell within Articles 2(1)(a) or 2(1)(f), particularly where they were consequential upon damage to the vessel itself.

1. The court treated CMA CGM S.A v Classica Shipping Co. Ltd as governing the scope of Article 2(1)(a) and Article 2(1)(f) of the Limitation Convention 1976. Loss or damage to the vessel by reference to whose tonnage the limit is calculated is not loss or damage to property occurring in direct connection with the operation of the ship within Article 2(1)(a).

2. Consequential loss arising from damage to that vessel is likewise outside Articles 2(1)(a) and 2(1)(f). Examples identified in the cited authority included the shipowner’s proportion of salvage remuneration and contribution to general average.

3. The same conclusion applies where the person seeking limitation is the owner and the claim is brought by a charterer. The issue turns on the scope of the claim subject to limitation, not on the class of person entitled to limit. The distinction between a claim by an owner against a charterer and the reverse claim is therefore immaterial.

4. The pleaded heads of claim were, subject to the parties’ concessions, consequential upon damage to the Darfur. Accordingly, Blue Nile was not entitled to limit its liability in respect of those claims. Questions of causation, remoteness and quantum remained for later determination and meant that the pleading alone could not finally resolve every potential issue in every head of claim.